Re: Determining Risk (calculating expected drawdown)

["Gaius Marius" <magnus@xxxxxxxxxxx>]

:The approach Lincoln Fiske mentions (considering
:only *downside* volatility rather than both upside
:and downside volatility to be "risk", and thus
:calculating a standard deviation of downside
:returns (losses)) has indeed been published.


:Schwager calls it "semideviation" and he given an
:example of using it to compute a modified Sharpe
:ratio which doesn't penalize wild equity upswings
:but does penalize downswings.


Is this his "Return Retracement Ratio" ? If it is, this is standardized in
the Portfolio Maximizer (which also gives out the Sharpe ratio [need 36
months of data in order to get this] and the Lars Kestner's K Ratio).

I"ve always thought that the equity curve, MAEs and Probablity of Ruin /
Monte Carlo simulations gives a good idea of the risk inherent in a system.
Perhaps these ratios can be a good suplement to the above.